Power generation plants, owned by public utilities for producing electric power, are generally built with excess capacity. The excess capacity allows for future growth in an area. For example, if a large manufacturing site opens in the area that the power generation plant provides power to, the power generation plant would be able to provide some or all of the power required for the plant from the excess capacity. In another example, if the population of an area increased, some or all of the power required for the consumers in the area could also be provided. With public utilities, power is generated by condensing turbines with full control over the generation range.
In addition to power generation plants owned by public utilities, there are also industrial energy units that produce power. In an industrial energy unit, part of the power is generated by back-pressure/extraction turbines. This part of power generation cannot be controlled as it is defined by the process and heating steam demand for the industrial application.
The excess capacity of a power plant is placed on a power grid according to a power contract. The power generation plant will enter into a power contract with grid operator or another entity that needs power. Power contracts are for specific time slots (e.g. one hour) on a specific day. A power generation plant delivers the specified amount of electricity, in units of Megawatt hours, to a power grid. The power grid is a distribution network for moving power from a generator to a consumer of power. The power grid includes transmission substations, high voltage transmission lines, power substations, transformers, power lines, transformer drums on power poles, and other equipment.
A power generation plant with excess capacity will have a set of power contracts specifying an amount of power to deliver to the power grid for a selected hour during a week. Many power generation plants with excess capacity will have a set of power contracts for each and every hour of the week. A power plant operator operates the power plant to meet the various contracts. Ideally, the power plant operator operates the plant to just meet all of the demands (direct consumers of the power generation plant) and just meet the power contract without producing excess power or having to cycle the equipment to generate the necessary power.
If a power generation plant falls short of meeting the power contract, power can be bought on the spot market to make up the difference between the amount of power delivered to the power grid and the promised amount. Buying power on the spot market is costly.